Q2 2022 Renalytix PLC Earnings Call
Good morning, and welcome to the.
Good morning, and welcome to my knowledge Conference call to review second quarter, and first half fiscal year 2022 results conference call. At this time all participants are in a listen only mode, we'll be facilitating a question and answer session towards the end of the call.
Mind you. This call is being recorded for replay purposes, I would now like to turn the call over to Peter Denardo of cap Com partners for a few introductory moments.
Thank you Norma and thank you all for participating in today's call. Joining me today from <unk> are James Mccullough, Chief Executive Officer, Tom Mclain President.
As Flemming, Chief Technology Officer, and James Sterling, Chief Financial Officer, before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 any statements made during this call that relate to expectations or predictions of fee.
Events results or performance are forward looking statements. Examples of these statements include without limitation statements related to kidney Intel axis ability to lower healthcare costs improve patient quality of life and set a long term standard of care trends in our market and potential benefits of government policy change the <unk>.
Pact of COVID-19 on our business, our expectations for hiring product development strategic partnerships and collaborations reimbursement decisions clinical studies and regulatory submissions and our business strategies and future growth. These statements involve material risks and uncertainties that could cause actual results or events to materially differ.
From those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements for a description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our annual report on form 20-F that was filed on October 21, 2021, with the Securities and exchange.
All forward looking statements made on this call are based on management's current estimates and various assumptions retail clinics disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise. This conference call contains time sensitive.
Information is accurate only as of the live broadcast today March 31, 2022, and with that I'll turn the call over to James for color James.
Thank you Peter Good morning, and good afternoon, we are pleased to report quarter over quarter growth with kidney Intel X testing volume within.
Within a backdrop of increasing insurance coverage and new health systems coming online.
In our New York launch market kidney and <unk> utilization has continued to accelerate through the end of March and.
I am pleased to report we have now provided integrated advanced risk assessment testing for more than 2600 patients with kidney disease and diabetes.
Physician response has been overwhelmingly positive.
Over the past six months kidney Intel likes clinical testing has now been brought online with the veterans Health administration.
Through our Albany, New York physician led payer partnership and at Atrium Health and Wake Forest Baptist Health in the southeast region of the United States.
We now estimate our current kidney until like serviceable insured population at greater than 1 million patients.
There are now currently an estimated 180 primary care physicians outside of the Veterans Administration health system, using kidney Intel X today, a number we plan to grow significantly through the remainder of the calendar year.
Combination of partnered hospital distribution, the veterans Health administration launch.
And increasing visibility.
Broad insurance payment provides the fundamentals necessary to drive kidney Intel X volume growth in 2022, 2023 and 2024.
Our focus remains delivering on major milestone.
Catalysts, including quarterly revenue growth expanded insurance payment.
<unk>, Medicare and Medicare advantage strategic partnerships to.
To expand distribution capability and regulatory approvals demand for our recently closed financing was strong, particularly from investors who have known the company for several years, we were fortunate to have multiple terms from several parties from which to choose and we believe this illustrates investor views on the strengths of the intrinsic value prop.
Physician for renal lititz insulting such a large unmet medical need.
We expect dilution impact will be limited to high single digits against creating a two year runway on which to execute our objectives, particularly.
Particularly if one or more of our ongoing advanced strategic partnerships discussions comes to fruition in calendar 2022.
We are increasingly comfortable with the potential for driving fiscal 2023 expectations for top line revenue.
We will continue to manage costs diligently and conduct periodic strategic reviews of resource allocation to optimize our growth.
As discussed on previous calls we believe insurance payment remains the single biggest factor for driving kidney and <unk> adoption over.
Over the past year, we have consistently demonstrated that we can secure payment for kidney Intel ekstrom of diverse set of insurance programs.
To date, we have received 22 private insurance coverage contracts and contracted with 31 state Medicaid programs. We have secured a 10 year federal government contract covering among others, a $950 payment for patient testing and the veterans Health Administration system Medicare and CMS has also established a national pricing of nine <unk>.
Third $50 per reportable result for kidney Intel X.
This successful pace of securing insurance payment and pricing for kidney Intel X has exceeded what is typical for the first year of launch for a laboratory developed test. We expect this aggressive pace to continue with our stated goal of achieving greater than 10 million patients under various forms of insurance payment for kidney Intel <unk> and Cao.
Wonder 2022.
Our primary distribution model was founded on partnering with health systems to reach large physician practice groups, particularly primary care physicians with.
With the addition to the Veterans Health administration, we expect to meet or exceed our previously stated goal of 20 health centers running kidney Intel X by the end of calendar 2022.
We also expect additional health systems to be brought up online in the June quarter, including recently announced St. Joseph Health in Central New York State to.
To discuss our commercial progress further I will now turn it over to Tom a claim Tom.
Thank you James.
Our commercial focus in calendar year 2022 remains on regions, where health system partnerships provide a base for adoption of kidney and <unk> testing.
As of the end of the March quarter, we have four regional sales directors and 12 account executives focused on the veterans Health Administration. We have also added a regional director and three sales executives focused on the New York and South East regions. This.
Sales effort is being complemented by a medical medical education effort.
Led by a team of seven medical Science liaisons and our partnership with the National Kidney Foundation to offer early stage chronic kidney disease education regionally.
Since our last Investor call <unk> has begun live testing at the Veterans Health administration. There are an estimated 1 million patients with existing diabetes and kidney disease in the D. J.
<unk> encompasses 171, VA centers with ancillary community based outpatient centers.
Critical step to deploy kidney Intel X across the eight centers is vendor as Asian, or refine Green Olympics as a testing service provider. We are currently vendor is at 16 centers with the target of 60 centers before the.
End of calendar year 2022.
Driving this success requires an educational effort among physicians within the veterans Health administration.
This patient population poses a sizable return on that investment over the long term.
As testing productivity increases and we further validate our VA deployment model, we will consider adding additional sales and marketing resources to further support deployment and test growth.
Turning now to our real World evidence study program at Mount Sinai Health system.
Several metrics are pointing to greater efficiencies driving adoption levels.
As an example time to first kidney Intel X order has dropped from 11% to three days since December .
Our partnership model with Mount Sinai Health system is also validating our approach to engage primary care physicians, that's through a combination of population health sponsorship and electronic health record integration.
That is demonstrating value in four important areas.
<unk> broad physician education and care pathway support.
Second electronic test ordering and reporting third advanced data analytics and for patient education and support.
Turning now to our laboratory testing infrastructure and personnel.
We have developed the capacity to scale efficiently as distribution opportunities expand.
Earlier. This March we had a successful FDA inspection of our New York City Lat.
We have now achieved cap accreditation and ISO certification for both Salt Lake City, and New York City Laboratories.
These are all important to expand testing services and qualified for certain reimbursement.
And finally, we've also continued to build a robust set of peer reviewed published data evidence, which is compelling for driving payer and market adoption.
This January data from a multinational cohort was published in the American Journal of Nephrology, demonstrating the value of kidney Intel X are monitoring patient response to new drug therapy.
In February at the World Congress of Nephrology, we provided results demonstrating kidney Intel X provides robust prognostic information.
Better predicts a patient's risk for decline in kidney function when compared to current standard diagnostics.
We also expect publication of additional clinical utility data in the June quarter and are preparing results from a cost effectiveness economic model for publication later this year.
Turning now to our technology and the basis for product evolution. Please let me introduce our Chief Technology Officer Forgets Fleming Fergus.
Thank you Tom.
I'd like to take this opportunity to update you on some research and development programs aimed at making kidney intellect.
Amir precision diagnostics platform for kidney disease and diabetes.
In the past few years, we have seen the emergence of multiple agent shown to slow kidney disease progression and reduce the risk of cardiovascular events.
However, even with the application of these new therapies are risk of these complications of diabetes remains very high.
<unk> to Turkey resistance Suboptimal response to these new therapies.
Therefore, it really we are focused on developing precision medicine solutions. So the integration of the biology from biomarker with a patient own clinical data to enable more effective clinical care and therapeutic margins.
Firstly.
We have a number of biomarker program with leading centers in the U S and Europe , including propriety patented biomarker technologies on the Johnson diabetes Center the University of Michigan.
The quality data for a number of these emerging Biomarkers has already been published leading journal and we expect additional high impact publications in the coming months.
We have established analytical capability and are currently evaluating over party.
Promising candidate for inclusion in future versions of the kidney intellect platform.
The first of which we plan to advance the validation this calendar year.
Secondly, <unk>.
Through multiple partnerships and collaborations we have established access to large by banks and <unk>.
Ted.
Purposes of developing and validating precision diagnostic product.
This includes access to over 20000 patient samples of landmark clinical trials.
Such as the canvas study of which we have already published important data.
And with World Bioscience exceeding 100000 patients from leading academic medical centers.
<unk> network of clinical and scientific research partners and collaborators, we are establishing a leadership position precision diagnostics and early stage kidney disease.
Finally.
We were extremely pleased to report earlier this week that through our reward evidence framework. We are on target to assemble the most up to date and divert serious collection of overt Heartbeat housing biologic assessment, then data from more than 5000 unique patients.
The reality accelerating precision medicine in diabetes, which we have named rapid.
It's comprised of blood and urine samples and Max D identified electronic health record data from over 95% of all subject from the reward evidence studies.
All participants who have consented sample and data to be used for arena.
Future research and development programs.
We are the only company, we know of with this scale of aggregated data and sources for analysis.
It is only true such specimen collection over multiple time points March two extensive clinical data and the full potential of genomics proteomics and data science, we realized a precision medicine and diabetes.
And be busy.
We believe that through rapid we are uniquely positioned to expand partnership opportunities and in passenger vehicles.
And confusion leveraging all of the above we are currently evaluating several potential new product solutions to add to our portfolio and income stream.
Specific programs are underway for the expansion of kidney intellect intended use target patients from underserved high risk groups, such as those of African ancestry.
We are also compiling data to demonstrate the value of repeat testing with kidney into like which would further help leverage our testing revenue growth.
This is just a snapshot of some of our R&D activities, which are complemented by our digital health and data analytics programs.
<unk>, the recently announced launch of my Internet portal, which allows easy access provider.
To order and receive reports of kidney intellect.
We look forward to providing additional updates on both our overall R&D platform and emerging products and solutions in the coming quarters.
Now I would like to hand, you over to James Sterling, Our Chief Financial Officer, who will provide more details on our financials.
Good morning, everyone.
Today, we issued two financial reports first is our six month interim report under <unk> accounting.
And the second is our quarterly SEC filing under U S. GAAP that included three and six month financials.
Both reports are for periods ended December 31 2021.
Those releases include full details and I will summarize highlights from our GAAP financials now.
Figures are in U S dollars, which is our reporting currency.
For the second quarter, we recorded $845000 in revenue, which comprised of nearly $700000 of revenue from kidney Intel X testing at Mount Sinai Health system and over $150000 of services from Astrazeneca.
For the prior year period, we posted $400000 of revenue all from pharmaceutical services.
We recorded nearly $500000 of costs attributable to revenue in the second quarter.
Our operating expenses were $14 $1 million for the quarter as compared to $8 8 million for the prior year period.
The increase was primarily driven by higher head count higher R&D expense related to studies at Mount Sinai Wake Forest University of Utah, as well as increased consulting and professional fees to support growth.
During the six months ended December 31, our operating expenses totaled $26 2 million compared to $14 2 million for the same period of 2020.
Net loss for the second quarter of fiscal 'twenty, two was $15 $3 million or 21 per share compared to a net loss of $9 1 million or <unk> 12 per share for the same period a year ago.
We ended the quarter with cash of nearly $40 million as of December 31, compared with $54 3 million at September 30.
The cash balance of course is prior to proceeds from the financing announced this morning.
We expect gross proceeds of $26 $8 million from the financing, which along with current cash gives us a sizable runway to execute our strategy, while growing testing volumes in topline revenue.
In the second quarter, we made a number of onetime investments pertaining to the recruiting equipping training and deploying of our sales force and associated marketing and other expenses to enable them to be most successful in the field. We're.
We're happy with the sales infrastructure, we now have in place to pursue the large VA and commercial hospital revenue that is available to us much.
Much of this included.
One time expenses that are not repeating and indeed, our quarterly burn rate has already reduced from the fiscal second quarter and we plan to exercise continued prudent cash discipline.
Operator, we would now like to open the call up for questions.
Thank you to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound key please standby, while we compile the Q&A roster.
Our first question comes from Dan <unk> with Stifel. Your line is now open.
Hi, guys.
Daniel <unk> on for Dan <unk>, Thanks for the questions and thanks for laying out some important milestones and metrics today that was really helpful.
So first on Mount Sinai.
You guys mentioned that the target.
The number of tests per week I'm, just wondering kind of where you exited in the quarter versus the goal is 300 per week.
Where that is now and then how should we think about that number.
When we consider other health partnerships that are coming online.
That's a very good question Dan.
We're getting there and there is clearly.
And acceleration.
Testing volume.
Mount Sinai implementation, obviously is complex.
We have learned a huge amount.
About what we need to do to effectively integrate into such a large health care system.
And that's paying dividends in terms of volume growth.
And I'd like to point out that.
We still maintain that target.
Of course.
I hate to refer to this but it was a factor we got knocked with army chron.
Which came in.
And everybody went back into protocol locked down for December and January and part of February .
But we are now seeing very encouraging signs around utility of kidney and <unk> adoption of kidney Intel X and physician response, which is critically important.
Physicians are overwhelmingly positive.
They're using especially at the primary care practice.
Kidney until X.
Within their practices, we're seeing repeat testing ordering we're seeing increasing volume build.
So we're comfortable with those targets.
In terms of how that should be looked at across systems. All of those systems are different.
Of course, but we feel that that is a reasonable target.
Or some of the larger systems that we're looking at mix is exclusive of the veterans Administration health.
System, which is its own animal.
But certainly for example, with wake Forest and atrium.
We are seeing increasing insurance coverage.
In those regions, it's giving us a head of steam.
To go out and complete the comprehensive insurance coverage that we really need to drive commercialization.
We're seeing a lot of evidence of that in this quarter, including one.
Major insurance coverage determination that we received in the southeast. Unfortunately, we're not allowed to the party.
But it does give us a major leg up to be.
We're able to start.
Broad scale commercial deployment in the southeast.
In atrium and wake Forest are situated in what's known as the diabetes belt.
In the southeast so certainly we expect.
Activities commercial activities.
Study activities to drive the same level of volumes that we are now seeing and experiencing Mount Sinai with the same targets.
So I think that's a very good proxy.
In other hospital systems like St Joseph which are smaller.
They are also part of larger networks. So there is a broader strategic play associated with bringing.
Some of the smaller hospital systems online that collectively add up.
To larger addressable markets.
For the for the Veterans Health administration.
That has its own category for us and as we've said there are approximately 1 million patients with diabetes and kidney disease.
The veterans Health administration.
Systems across 171 centers.
<unk> talked about our progress in terms of getting vendor rise in each one of those.
Centers Theres, a whole sequence of processes you need to go through but that's an important one.
And as a metric for how we are starting now to make kidney and <unk> access available across a national system and eventually we expect to.
Hopefully get to a 121 171 centers.
But the $1 billion diabetic kidney disease patients there.
Is our addressable market.
And of course, we have a 10 year federal government contract, which is specified $950 per reportable results.
So that gives us.
A significant advantage as we go to move forward.
Hope I've answered your question.
Yeah. Thanks James.
You mentioned the positive physician response.
So you gave that time to first order from going from 11% to three days that sounds positive, but can you just explain that metric to me I want to make sure I understand it and then another similar metric you had previously given was the adoption rate you said I think it was like 80 within Mt sign I think it was like 80% of physicians that.
Ordered kidney <unk> ordered again Ken.
Make sure I'm right with that and then also where is that number now is that is that still sounding positive maybe more positive.
Yes, and I will let Tom answer that question just to say, we are monitoring a number of utility metrics.
And we've done we've done diagnostic rollouts many times in our careers over the last several decades.
And I am very pleased with the physician responses, we've paid a lot of attention to the behavioral dynamics associated with bringing advanced prognosis into an integrated system down to the primary care level.
A lot of fancy words to say you got to get a simple result, which is in the clinical workflow doesn't take much time provides an actionable item so that primary care physician.
But Tom would you mind running through some of the metrics that you are seeing all of which suggests that.
Kidney and <unk> is working.
And it's doing what we thought it would do and all of the upfront.
Work that we've done around the behavioral economics.
The point kidney Intel X and a large system.
That is paying off.
Okay.
Im happy to fill in a little bit here James.
So time to first order similar to what I described at the DHA kidney <unk> first in class. So there is an educational effort that is required to make the primary care physician aware of the tests and how to utilize the test in their practice.
In the December quarter, we were seeing the time between that education of the primary care physician and to getting that first order of the test at 11 days, that's now reduced to three days, which.
Mark a couple of things number one the education programs the way that we approach it with a primary care physician, we'd become much more sophisticated much more targeted but also as we see broader adoption in that health system like Mount Sinai.
The primary care physicians are much more open to immediately utilizing the test in their practice. So that is an important metric.
In terms of.
One time orders versus physician utilizing the test regularly on those metrics continue to be consistent with what we described before again I think as broad system of awareness of the value of kidney and telex has advanced.
The commitment to regularly utilize kidney and telex in how they treat their patients and route them through the care pathway at Mount Sinai that Leverages that kidney intelligence information is also remaining as strong.
There will always youll never get to 100% on that but when you get into very high percentages like what we have described previously that's an affirmation that is a clinical care approach that can be widely adopted.
Alright, great. That's helpful and then last one for me.
You mentioned this cost effectiveness economic model could you just provide some details on what we might see and on the timing on that and then also.
When might we expect some real world evidence for Mount Sinai and any update on what metrics, we might expect to see if.
If you can provide that at this time.
On the health economic data itself.
You may recall that we published a budget impact analysis.
On a year ago that analysis is directed to payers private payors and it looks at a patient population the way that our payer looks at it.
To provide health economic return expectations for an insurance provider.
Cost effectiveness model is really important to us because it looks at the patient population the way that a integrated health system or the Medicare program, where a patient gets in Medicare and stays on Medicare or the veterans Health administration would look at those patients and.
It considers some of the important factors like.
Mortality patient quality of life.
And that is the more typical health economic analysis that is described.
In the literature, but also utilized broadly in publications about health economic benefits.
So that is the importance of that study.
And again, we're preparing it for publication now and expect that to be published this year that will help accelerate our commercial efforts within health systems in structuring value based care arrangements and within that turns health administration.
In terms of the real world evidence from Mount Sinai on there are interim data points at six to 12 months, we expect to both present and publish data from the Mount Sinai study this calendar year.
Great. Thank you guys.
Thank you.
Question comes from Anita Dushyanth with Danbury capital markets. Your line is open.
Hi, good morning, Thanks for taking my questions I just have a quick.
Wondering.
Yes.
What kind of cat and listening to the call that in 2022 that might kind of help guide, but option of kidney Tonight.
And.
If you could talk about.
When you might be.
Content and providing guidance.
Adoption.
And then second half perhaps.
And just one more related to the.
Yes.
Does that require it I understand the reimbursement.
While driving.
And faster but.
Just one thing.
Kidney interlinked with maintenance.
And so it will be successful thank you.
Thanks Cindy.
Start with your last question FDA.
It is very important to understand we said this from the beginning.
The number one risk factor is reimbursement of experienced this time and time again.
Over my diagnostic career.
There are many examples of companies that have received FDA and everybody looks around it themselves that says okay. Now what do we do to get paid.
And we started <unk> we.
We started it.
Saying there are three things we have to.
Worry about or more obviously, but the three things we have to worry about how to reimbursement reimbursement reimbursement, we configured the company we configured the strategy.
A lot of the clinical trial design.
All around proving baseline utility and importance of kidney <unk> ultimately for <unk>.
The ability to get paid.
Reimbursement and payment is the one thing.
That has been so difficult in the diagnostic industry over decades.
The majority of diagnostic tests that are in the market today have not gone through FDA.
And there are some very big diagnostic testers of companies, which have been built major franchises without going through FDA. This is very important we voluntarily chose to go through FDA. Because this is a new category.
A diagnostic test and we very much believe in achieving.
Regulatory approval.
But I want to make it very clear that.
The number one risk factor by a long shot is how do you get insurance coverage and how do you get payment because that is what drives revenue ultimately thats what creates the capital environment for us to finance or <unk>.
Marketing National marketing and then eventually in international marketing strategy.
And as I've said on the phone today.
We have made significant strides.
In reducing the risk.
Around insurance payment against kidney until actually we now have a sizeable population.
That hasnt full inch full insurance.
<unk> ability for kidney <unk> testing.
Which to me is the gateway to.
Building the business.
We very much want FDA, we want to go through the process.
We have a huge amount of respect for the regulatory process and we are.
Moving forward, but again reimbursement remains.
Number one driving objective to building a large franchise.
And now that I've done that I can't remember your other two questions Indeed, and I am sorry can you could you repeat those.
Yeah. Thanks for the color gains that I was just wondering what kind of key category.
Okay, well I can imply.
Hi, guys Hi.
So we have a number of catalysts and.
One of the objectives that we wanted to do was remove the financing risk.
And the uncertainty around the balance sheet with renal clinics.
That we can have 100% focused on making sure we hit.
A number of major catalysts this year.
So these are near term catalysts, what youre going to have <unk>.
Significant impact on the growth of the company, obviously, starting with expanded insurance coverage.
We are now pursuing multiple avenues for Medicare payment that opens up a very broad population.
Which would have insurance coverage and that would have a significant impact on revenue growth and adoption for.
Kidney and <unk>.
We do believe that we are in a position to achieve that in 2022, and obviously that would be one of the highest milestones that I think that we could achieve in this particular population, which is diabetes and kidney disease.
So many people are in the Medicare Medicare advantage Medicaid population. So please look forward to more news continuous news flowing out around the payment front.
Over the next several quarters.
Another major catalysts, obviously as we are growing testing volume.
Which is critical testing volume is now coming from multiple directions, including for example, the VA medical system I'm.
Mount Sinai Health system, some of our other partners.
And we do expect that testing volume will continue.
To accelerate now that we put all of the fundamentals in place to do that.
Strategic partnering is also taking on a frontline for us.
In 2022, we are in.
Ongoing discussions with a number of different potential major.
Major strategic partners.
Who could.
Help us expand distribution nationally could provide.
Complementary products.
What you are reporting physicians important for physicians to use to help reduce patient suffering.
And the diabetes and kidney community.
And I believe that.
Ah kidney and <unk> analytics have opened up a very important market access channels.
Through integrated provision.
<unk>.
Prognosis diagnosis.
And data analytics that are very valuable to.
Larger strategic partners, who also want to be in that same pace.
Space and everybody wins the patients when the physicians when obviously the company's win.
The shareholders win.
If we bring multiple groups together.
To help expand that market access channel.
So there are a number of things, which can catalyze growth.
In the near term.
Investors should expect continuous news flow in 2022.
Thanks, Dave that was very helpful.
Thank you.
Our next question comes from <unk>, Chen with H C. Wainwright Your line is open.
Alright, Thank you for taking my questions.
Question is is the.
Intel X revenue recorded in the quarter directly proportional to the volume of tests conducted in the quarter.
No it is not.
And there's a bit of a disconnect which is a classical disconnect.
It is important for us to build user experience.
It is important for us to bring physicians online for testing through multiple avenues, including the real world evidence program.
Not all of the real World evidence program.
Certainly revenue generating pest.
But what's going to happen now is as the volume has increased.
And the insurance coverage comes in the.
The revenue will start to catch up for the the paid for testing, we will start to catch up to the volume growth, but we expect the volume growth will always be ahead of the reported revenue.
And that is the way it works and I think this is an important point.
One component of strategy with achieving comprehensive insurance coverage is demonstrating use utility and demand.
So.
That is really the objective we want to see a lot of testing volume growth, we want to see a lot of reaction from physicians, we wanted to get a lot of real world evidence data and utility at the end of the day is what's going to win out.
Broad scale adoption, but you will see testing volume is running ahead of revenue growth.
You will start to see the gap closing.
As we continue to get more and more insurance coverage, including Medicare.
So what is the current.
Our reimbursement collection rates for the tests tests conducted on.
From a commercial basis.
Youre looking for a percentage of paid forecast versus volume.
Yes.
I don't have that off hand.
And I don't know, whether we are prepared to report that this quarter, but that will certainly be a metric.
That we would like to report out in two.
2022, and as we get back actually to Anita his previous question on guidance.
Obviously <unk> been very shy about providing guidance I think that's been appropriate.
At this stage of growth.
But as I've said in my introductory remarks, we're starting to develop confidence.
Around guidance, we're starting to develop confidence around 2023.
Revenue picture and at some point.
We expect we will have to provide guidance.
Which will include more and more metrics I think we're starting to.
As we get more confidence a lot more.
Use of kidney Intel actually a more systems online, we're running through allison's of patients tested now.
We're starting to be in a position and we've done that on this call, where we are providing more and more specific utility metrics volume metrics.
That will help us define the the <unk>.
True core models.
In fiscal 'twenty, three and fiscal 'twenty four.
I just want to make sure before.
Before we do that.
We are providing.
Something that we can meet or exceed.
Which is important.
Got it and you mentioned that going from 16, BHA health centers to 16.
<unk> by the end of this year so.
How many physicians are available 60 centers ready to prescribe <unk>.
Our next tests and what is the volume.
Look forward to.
Yeah again, we're not going to project volume, but I'll, let Tom answer that question because it is important as we start to create a.
A lot more inroads into the VA system.
VA Center size is variable as you would expect moving from large urban centers into <unk>.
Some of the states that are in the Midwest and Rocky Mountain regions.
There.
There isn't a rule of thumb as far as number of primary care clinicians per via a center.
And I I would have to go into our Salesforce application to actually give you an accurate response, there that's something that we can do but I.
I wouldn't want to just quote something off the top of my head and be incorrect with that.
Okay.
Lastly, do you expect quarterly operating expenses to increase in the coming quarters.
No.
I think we saw a.
A spike in expenses as we set up the commercial infrastructure.
Cheap.
When you start deploying.
Our national sales force Youre moving into different categories.
There's just the baseline infrastructure that you have to set up to support that and Thats reflected in the December quarter numbers.
We did refer to that.
We feel a lot of these are one time expenses, but I want to make it abundantly clear we are going to be very prudent in terms of resource allocation.
Going forward and increasingly.
There's going to be management demand to tie resource allocation to revenue generation.
It is now time, we're hitting a tipping point, where we start to build this business.
And ultimately I want to be in a position.
In calendar 2022, where we're actually reducing.
Burn rate.
Over quarter, unless a major opportunity comes in place.
Which will be a no brainer for all of us to spend additional money but.
Especially in this market environment, we are.
Not looking to tap the capital markets.
Sequentially to fund a burn rate.
We're in a position now with this previous financing, where we have plenty of runway to execute on our objectives.
Bob.
And I certainly intend to make sure that we maintain that runway.
I think that's very important.
Thank you.
Thank you as a reminder to ask a question you will need to press star one.
Our next question comes from Mark Massaro with <unk>. Your line is open.
Hey, guys. Thanks for taking the questions.
Wanted to see if you've had any updates with Medicare and I apologize if I missed this I joined the call little bit late but.
Any any update from whether it's palmetto no.
Iridium mgs or first coast.
I'm just curious if you.
If you build Medicare and if you've received any type of payment from them at this time.
Tom.
Sure.
So we are we have done the work to prepare a dossier, which shares the background of kidney and <unk> and we are going to initiate the first Medicare claims in the second calendar quarter of this year.
And we will gauge the payment percentage that we realize with that first regional Medicare administrative contractor during the quarter and we expect to expand that to the other contractors over the summer time period.
To understand exactly what that payment percentage is going to be.
For others on the call I know, what youre alluding to mark that.
Under new regulations for how CMS oversees the payment performance of these Medicare administrative contractors.
Often with test like kidney and Telex laboratory secure out of the gate certain payment percentage that is significant and they use that as a basis for continuing to do business with Medicare and so we will we will see how we fare with that.
When we share our results at the end.
Next quarter.
Okay. That's helpful.
I guess for the the commentary that you plan to meet or exceed 20 health care systems.
How many of those are VA hospitals versus maybe systems that you're planning to add that youre not yet.
The contracted with at this time.
Yes, so not prepared to answer that question, Mark, which Dan areas as the previous quarter.
Hi.
The answer is that we don't exactly know what the mix is going to be but now that we are vendor rising and moving out to the VA health system, we have a number of other <unk>.
Systems.
<unk> in the pipeline.
<unk>.
We've made the comment that we expect to meet or exceed 20 systems by the end of the year.
Exactly what the ratio is going to be between VA health care systems and <unk>.
Outside of <unk>, I don't know lets see how that plays out.
But what we're trying to do is position ourselves to exceed.
That number.
And with the way that the VA rollout is going.
The VA will play a measurable percentage of those 20 hospital systems.
And I think when we start to get over 20.
Centers is the proper word.
That is a very meaningful distribution.
That means that we can reach a whole lot of patients.
And we can do it in most cases with support of population health departments clinical medicine, and what we're demonstrating at Mount Sinai is that is a unique model and it works very well.
Starting to drive utility. It also gives us an incredible opportunity to gather data.
Specifically behavioral data to understand how is advanced prognosis affecting quality of care.
How are physicians reacting to advanced prognosis, how can we improve kidney and <unk> to make the process better simpler faster, especially for the primary care physician so that they can get.
The care and the understanding around that patient.
No.
20 systems I'm I'm confident.
At the moment I would like to exceed it I think the VA Medical center will be a significant.
Part of that group and I think we will add additional ibm's on top as well should be a very good mix in 2022.
Okay terrific and maybe just my last question I know that Youre not prepared.
Initiate guidance today so.
But on the other hand, we are pretty much done with.
With the March quarter.
So you had a nice lift sequentially.
Q4, a nice.
$200000 lift, but the March quarter would suggest.
Another $1 million on top of that I think $1 seven it's consensus for March.
And I think $9 four as consensus for fiscal year June .
So recognizing that we're pretty much done with March.
For.
For the purposes of just not having significant surprises can you just comment about whether or not you think consensus is aligned appropriately or should we sort of baked in a little bit of wiggle room as you kind of operationalize the business in the early launch.
Maybe baked in some additional conservatism relative to where the street is.
So I'm not going to take the bait on that market.
Largely because there are a number of variables.
What's you are happening at the moment, which could have a significant impact.
On how that ultimate the yearend number rolls out.
Uh huh.
But I think that we are making significant progress and I think that the most important thing is that we're showing a consistent.
The increase in testing volume growth quarter over quarter.
Getting to the point right now, where we're having a lot of confidence in that.
More importantly.
I think the real question for US is how do we scale this business to the point, where we can start to.
Generate significant revenue in fiscal 2023.
And as I've said.
In my statement.
That is very much a focus.
And influences influences on that are going to be strategic partnering for.
For example, exactly how quickly Rollouts continue.
In various market.
Average use like the VA medical system.
But we're starting to get a handle.
How that is looking and we'll provide more information.
As we develop confidence.
Okay.
Is there any way to get an update on your.
Go to market strategy I think.
You've talked about.
Scaling.
Okay.
As well as <unk>, but can you give us an update and.
And could you also comment on your funnel.
Potential nib health systems.
Tom do you want to take that.
Sure so.
In terms of new health systems, we are committed to pursuing our regional approach so looking for synergies.
Focus.
<unk> focused significantly on the New York northeastern markets in the South eastern markets of the U S. We think that that makes really good sense. Both from a business standpoint building, where we have success in payer coverage, but it also makes commercial sense because it creates a.
A very cost efficient model in terms of the investment in sales resources.
We as we go forward here and we look at return on investment.
In a significant way that <unk> described.
And did I Miss something else there Mark I'm sorry.
Oh, yes, the number of salespeople and just how youre planning to add MSL to support the territory reps.
Sure So our whole sales force.
This plan is that we will invest in that support where everything that we look at in terms of our commercial models indicate that we will have a significant return on that investment.
Within the first 12 months.
In terms of the medical science liaison the physician education support that we need to provide.
What we understand clearly with <unk>.
Is that this is new.
We know primary care physician spend less than 10 hours in their medical education on chronic kidney disease. So we.
We are very committed to having trained professionals clinical backgrounds, who are out in the field and able to first create awareness.
The importance of treating early stage kidney disease.
It's 95% of the patient population with kidney disease, but also to support them in understanding the new therapeutic approaches all of the recent developments in what can be done to delay or prevent progression so as that commercial footprint expands.
We expect that that MSL that medical education footprint will expand proportionately.
Yeah.
Okay, great congrats on the progress as well as the financing.
Yeah.
Thank you.
Next question comes from James Netflix with Investec. Your line is open.
Hi, everyone.
Just a couple of them.
Gap filling questions may face.
First of all on the consented rapid.
<unk>.
You may have mentioned this but just to understand what patients data that goes into this database does this scale with the number of patients tested on a commercial basis or is it an entirely separate in debit.
Just had a thought all requisite rapid generates from commercial testing, but what I'm curious about is what proportion of commercial test and to develop the database space.
I understand how glut.
And secondly on the EHR integration.
Again, just to say, okay could you just confirm with health system or kind of linked up in this matter.
This is determining the pace of the rollout, particularly into the VA.
And then finally on the gross margin.
Assuming scaling in line with realistic expectations, where could we see this going over the next few years. Thank you.
Thank you guys and I'll, let <unk> answer your first two questions on gross margin. We have said in the past that we expect as we continue to scale up our target is 80% plus gross margins.
We see no reason why we can't hit that number based on the cost of goods that we're experiencing.
Through several thousand tests at the moment, so that number is very much firming up.
And I'm glad you asked about rapid.
Because that is such a valuable intrinsic program because at the end of the day it is data and.
And it is quality data over time.
That is going to generate extensive reimbursement, it's going to help with additional regulatory.
Approvals, it's going to provide more utility data to get into guidelines.
Data is what drives everything in our business and rapid is highly unique you just don't see such large longitudinal comprehensive quality controlled.
Biobanks with matching EHR out there. So this will be one of the largest if not the largest commercially available.
Bio repository for product development data analytics et cetera, but it's a very good question on what goes into it.
Do you want to just talk a little bit more about it.
Hi, Ann.
Just to clarify so.
To be included into bio repository patients must consent for both their samples which are collected longitudinally up to three times over the course of the two to three year periods. So they are consenting for multiple sample collections and further use of the longitudinal data so OLED.
We have to be very disciplined to OLED peak patients included in our rapid repository must have consensus and was typically come from our real world evidence IRB approved protocols.
Of which we have three underway.
Pardon me may evolve.
In the future years.
Straightforward commercial test.
Does not.
Enable us to use that data in our in our bio repository, because the patient hasnt consensus for that purpose.
Separately we.
Yeah.
In relation to health system integrations.
Yes.
Where to where they are.
Locked on the Mount Sinai integration, we've taken those learnings and move that forward into the wake Forest integration and we're using a hybrid of the my Internet platform and our integration model with atrium health.
Down in North Carolina also.
Advanced planning stages and shield our systems for for the.
The full integration model, which involves deploying.
Software to extract the data that we need to execute the kidney into next test and seamlessly delivered results.
Right.
Obviously, all of those with future pipeline systems.
Looking at using that.
Streamline module integration going forward.
Okay, great. That's okay. Thank you.
Thank you and again, ladies and gentlemen to ask a question you will need to press star one.
And I'm currently showing no questions at this time, ladies and gentlemen, Thank you for your participation in today's conference. You May now disconnect everyone have a wonderful day.
Okay.
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